How to create a business case for Accounts Payable Automation
Did you know in a recent survey by SSON only 9% of companies have fully automated
Accounts Payable processes?
Accounts Payable (AP) automation offers significant advantages, from cost savings to improved operational efficiency. However, securing buy-in from all the stakeholders requires a strong business case that clearly identifies the strategic, financial and operational benefits.
Removing the manual processes from accounts payable increases efficiency, streamlining the workflow from receipt of invoice to payment. It becomes a touchless process that captures the invoice data and related documents, matches to approved purchase order, codes to the relevant entity and general ledger code, and posts to the finance system ready for payment within minutes of the invoice arriving.
Added to this increased efficiency, are full visibility and audit trail of the invoice in real time, increased cashflow forecasting, more accurate KPI reporting and stronger compliance and risk mitigation. Automated workflows ensure adherence to internal policies & regulatory requirements. This reduces fraud risks and strengthens financial controls.
This guided template for building a business will support an automation project plan by covering the 6 pillars of reference laid out in the TEI (Total Economic Impact) framework by Forrester:
- Objectives & Goals
- Solution
- Quantified & Qualitative Benefits
- Financial Analysis
- Risks & Sensitivity
- Conclusion
A well-built Accounts Payable Automation solution business case enables finance leaders to demonstrate how Accounts Payable Automation aligns with strategic objectives, delivers tangible financial benefits, and positions the organisation for long-term success.
Executive Summary
The executive summary is the first, and often only, section many stakeholders will read, so it needs to be good! It should provide an overview of what the business case covers in a clear and compelling manner.
Describe the state of accounts payable now and the impact on the business if the processes continue without automation. Explain what will happen to the processes and team if automation is implemented, make reference to the idententified risks and follow this with a recommendation for the investment. It should be written in the form of a persuasive story that captures and keeps the attention of the reader but also allows them the fully understand what is being proposed without further reading.
Section 1: Objectives and Goals
Use this section of your business case to list out the goals and objectives for the automation plan.
This phase focuses on giving a clear picture of the current state of AP operations, including the people, processes, and technology in place. A thorough assessment of how invoices are received, processed, and paid is essential and will expose the areas that are in need of improvement. Mapping out the existing workflow allows the business to highlight the inefficiencies and specific challenges that must be addressed by the automation solution. Don’t forget the downstream activities too, such as missed early payment discounts, duplicate invoice payments and unnecessary late fees. These secondary pain points are crucial for building the financial analysis later.
Section 2: Solution
This section should showcase the proposed solution. It should outline the functionality and include the scope and implementation approach.
It should list details such as technical environment and impact, number of proposed users, commercials such as length of contract and setup and annual costs. Details of training and support, and a proposed start and finish timeline for the project.
Section 3: Quantified & Qualitative Benefits
Identify the business benefits of the chosen solution. Explain how they solve the pain points identified in Section 1, Objectives and Goals.
Quantified benefits are measurable, data-driven advantages that are realised by implementing automation. These benefits are typically expressed in financial terms, operational improvements, or efficiency gains, providing concrete evidence to justify the investment and are used in the financial analysis in section 4.
Qualitative benefits refer to the non-financial advantages that are not so easily measured in monetary terms but are significant value. These benefits enhance efficiency, contribute to employee satisfaction, enable better supplier relationships and overall business agility.
Section 4: Financial Analysis
The financial benefits of process automation usually come from cost savings, efficiency gains and risk reduction. Identifying these key benefits will allow you to build the 3 elements required in the financial analysis.
• Net Present Value (NPV): Future value of cost savings & benefits.
• Return on Investment (ROI): (Total Benefits - Costs) / Costs × 100%.
• Payback Period: Time required to recover initial investment.
The first step is to look at cost savings, refer to Section 3 for the quantified benefits as a guide of what to include.
Step 2 is to forecast future cashflow over a 3-5 year period. This cash flow forecast should then be adjusted for risk factors. A ‘discount rate’ reflecting risk and opportunity cost is often used. This is usually the Weighted Average Cost of Capital (WACC) based on the company's cost of capital, risk factors, and alternative investment opportunities. If the company doesn’t have a defined WACC it can use industry-standard discount rates. For process automation, companies often use 8-12% based on the level of risk and return expectations.
The last step is to use these adjusted cash flows in the Net Present Value (NPV) and Return on Investment (ROI) formulas to evaluate project feasibility.
Section 5: Risks and Sensitivity
Identifying potential risks and sensitivities when preparing a business case
is essential to build credibility and manage stakeholder expectations.
Detailing the risks in the business case shows that challenges have been identified as
potentially having an impact on the success of the project. Planning a strategy to mitigate these risks in advance will increase trust with stakeholders responsible, show a balanced approach to investment that is focused on long-term success rather than short-term gains.
Section 6: Conclusion and Next Steps
Write a conclusion that provides a clear and concise summary of all the
points made above. It should reiterate the goals and objectives, reinforce the key benefits and confirm that the potential risks have been identified and considered.
Include information about the proposed solution, the costs and ROI and payback term and afirm recommendation to proceed, highlighting the positive financial and operational impact expected, including any additional information that influenced the choice of supplier. Following the conclusion, the next steps should outline a clear action plan as follows:
• Identify all stakeholders that are needed to secure final approval
• Confirming budget allocation
• Establish a detailed project plan from the chosen solution provider
• Appoint a project team and define key milestones
• Initiate a plan to communicate project progress and milestones achieved.
